How opinions scooped the news on the JOBS Act’s problems

By Ben Walsh

April 4, 2012

This morning, Bloomberg prominently featured an article on the JOBS Act on its homepage:

After the dot-com bust a decade ago, regulators forced Wall Street to adopt rules aimed at keeping stock analysts from over-praising companies doing deals with their banks. President Barack Obama is set to sign a law that would undo at least some of the changes.

One measure in the bill, passed by Congress March 22 to ease securities rules for closely held firms, would restore communication between bank research and underwriting arms. Those links were restricted in 2003 by regulators and by a separate settlement between then-New York Attorney General Eliot Spitzer and 10 firms including Goldman Sachs Group Inc. and JPMorgan Chase & Co.

That is certifiably old news and is acknowledged by the article itself as such. Not just slightly old when judged by the insatiable pace Bloomberg prides itself on. Weeks old. Here’s Bloomberg’s opinion arm, Bloomberg View, on March 19, two and a half weeks earlier:

Perhaps most disappointing, the bill rolls back rules meant to prevent analysts from misleading investors by talking up stocks simply to win investment banking business. Such conflicts of interest were banned in 2003, after federal and state investigations revealed analysts were privately deriding stocks they were publicly touting and failing to disclose conflicts.

So Bloomberg isn’t digging deep to bring some hidden gem of a fact to light. The key points it outlines were made elsewhere by Eliot Spitzer himself. Simon Johnson also opposed it, along with the always sensible and prevaricating-to-a-fault editorial page of The New York Times. Felix also had objections. These pieces drew on a rich vein criticism from sources like the current chairman of the SEC, Mary Schapiro, the same agency’s former chairman Arthur Levitt and numerous consumer and labor groups.

But because most of the high profile examples of criticism of the JOBS Act came in the form of opinion and editorial pieces, not straight news, Bloomberg splashed the story across its homepage today as if it were freshly discovered. That sequence is, of course, the inverse of what is assumed to happen. Stereotypical opinion writers are supposed to just sit around waiting for real news to happen so that they can say what they think about it. Here, opinion pieces were ahead of their own organization’s reporters. As if to prove the point, Andrew Ross Sorkin, whose weekly column attempts to blend of opinion with news, also wrote against the JOBS Act this week, after it had been roundly castigated elsewhere and eventually passed by the House and Senate.

The reason for this seemingly inverted timeline could be another example of the New York/Washington divide in financial and political reporting. The JOBS Act was considered political coverage and so the legislative ins and outs were reported. But the reporters with the background and context to delve into the substance of the criticisms being made — that is, financial reporters based in New York or those based in DC who cover the regulators — weren’t similarly engaged. More generally, political reporters don’t tend to take their cues from financial commentators.

This story also exposes a key weakness with legislative reporting. The JOBS Act was written and supported by a highly organized group of financial and venture industry lobbyists (whose activity on the Durbin Amendment is chronicled in detail here), while there was very little effective, lobbyist-based opposition to the bill. Much like the legislative process itself, political reporting is incredibly responsive to highly motivated and coordinated groups.

For the monied interests pushing for the act to pass, the hard news reporting on the faults of the JOBS Act came at the exact right time: long after it actually mattered.